Foundries racing to construct 300-mm plants ahead of IDMs

As integrated-device manufacturers demonstrate renewed interest in erecting 300-mm-wafer fabs, foundry players are securing a place of their own in the race to bring the next-generation plants on line.

United Microelectronics Corp.'s announcement last week that it will build a 300-mm-wafer fab with Hitachi Ltd. is the latest indication that foundries intend to take advantage of an industry boom, a trend toward production outsourcing, and increased demand for devices requiring both advanced IC design and system-on-a-chip integration.

Fab construction at foundries like UMC and rival Taiwan Semiconductor Manufacturing Co. Ltd. is bucking previous cycles in which foundries took a back seat to IDMs, which forged the way for leading-edge technology.

"The foundries will be among the first to take advantage of 300-mm wafers in production," said analyst James Hines of Dataquest Inc., San Jose. "Many of the announcements we have seen recently are being driven in part by the need to bring on more capacity.

"The foundries, and chip makers in general, are moving into another growth cycle. They're earning the profits to fund capital growth and are making more strategic decisions about going to 300 mm," he said.

Under the arrangement with Hitachi, UMC, Hsinchu, Taiwan, will establish a joint-venture company to manufacture 300-mm wafers at a Hitachi site in Japan's Ibaraki prefecture. The yet-to-be-named venture is expected to begin mass production by April 2001, with a manufacturing run rate of 7,000 wafers per month by the second half of the year, the companies said.

While Hitachi will take a 60% equity position in the new company, the partners will share fab space equally, with UMC taking half the capacity for use by its foundry customers. The initial investment for the fab is about $684 million.

"This joint venture will result in one of the world's first 300-mm-wafer plants in mass production," said UMC chairman Robert Tsao in a statement. "It is being established in response to strong customer demand for advanced technologies and increased capacity."

While the foundries gear up to capture renewed demand and deliver technologically advanced devices, some analysts are not so sure the most aggressive players will garner all the rewards.

"It's not clear to me why foundries want to be in the first wave of bringing up 300-mm plants," said Danny Lam, an analyst at Fisher-Holstein Inc., Wilmington, Del. "If you survey all of the capacity needs and geometry requirements, foundries don't need to be first with the cutting-edge technology. The average lot size of devices using new technology is small for foundries."

In fact, at least one foundry, Singapore's Chartered Semiconductor Manufacturing Pte. Ltd., has taken a different approach by moving to finer line geometries rather than pushing the envelope on wafer size. The move to a 300-mm-wafer fab usually is necessary in a high-volume commodity market, such as in the memory sector, which is not part of Chartered's overall strategy, according to Kevin Meyer, the company's vice president of worldwide marketing.

"Three hundred mm lends itself to applications that will be built in high volume without too many changes," Meyer said. "With that said, you can see where the relationship between Hitachi and UMC may be beneficial. But, we have made a strategic decision to move away from commodity memory. Our customer base needs us to be more flexible."

UMC said its new jointly owned fab will complement the foundry's other planned 300-mm-wafer venture in Taiwan's new Tainan Science-based Industrial Park, as well as strengthen its position in the Japanese market. Last year, UMC acquired a 56% stake in Nippon Steel Semiconductor Corp. and is converting the DRAM production facility into a silicon foundry operation.

"A motivating factor in setting up the joint venture could be to better position itself in the Japanese market," Hines said. "Today, most of the foundry business is driven by fabless companies in the U.S. But as Japanese companies face tight capacity they may start looking to foundries to meet demand."

UMC isn't alone in the run to transition from 8- to 12-in.-wafer fabs.

In the last four years, a number of chip makers have announced plans to ramp up 300-mm-wafer operations. The industry downturn, however, delayed capital projects as chip makers battled to overcome weak earnings.

The resurging semiconductor market, which is poised for about 20% annual growth in 2000 and 2001, according to the Semiconductor Industry Association, has renewed chip makers' ability to finance the costly new fabs, analysts said. Although Dataquest estimates that 300-mm-wafer volume manufacturing is not likely to become the industry norm until 2003, the two-year ramp-up associated with a new plant may prompt other companies in the next few quarters to put their plants back on the drawing board, observers said.

Indeed, several top-tier IDMs, which traditionally have taken the lead in fab construction as a way to advance their own designs, are shaking the dust off their blueprints and putting construction efforts back on a schedule.

A few months ago, Semiconductor300, a joint venture between Motorola Inc. and Infineon Technologies AG, shipped the first products made on 300-mm wafers. The parts are being turned out in Dresden, Germany, at the venture's 12-in.-wafer fab, which makes 64-Mbit DRAM on a 0.25-micron process.

Intel Corp. announced in June that it was "activating" its 300-mm-wafer development program, and is expected to start 300-mm-wafer production on a 0.13-micron process with copper metalization in 2002. The process technology development will be done at Intel's D1C fab in Oregon, and the company said it plans to start installing 300-mm-wafer equipment this month.

Samsung Electronics Co. Ltd.'s Line 11 plant, to be built in the next couple of years, will mark the Korean company's entry into the 300-mm-wafer production phase. And NEC Corp., along with joint-venture partner Hitachi, has formed NEC-Hitachi Memory Inc., which is said to be considering a 300-mm-wafer plant sometime in the future.

On the foundry side, TSMC broke ground last month on Fab 12, its first 12-in.-wafer facility. The fab, which is projected to commence production by 2002, is being built on a site where Vanguard International Semiconductor Corp. also plans to erect a 300-mm-wafer fab.